FEDERAL COURT OF APPEALS FINDS AGAINST CAB DRIVERS ON EMPLOYMENT LAW ISSUES

Whether a person is an employee or an independent contractor, and what rights he has against his supposed employer, is a critical issue that is frequently litigated in State and Federal Courts. In a recent case, the United States Court of Appeals for the Seventh Circuit held that even if the Plaintiffs/taxi drivers were employees, they had no right to claim unpaid wages under the Illinois Wage Payment and Collection Act.

Like many such arrangements, the cab companies leased cabs to the drivers for a “shift fee,” which was computed weekly or daily. The drivers also had to pay the operating expenses and insurance.

The only source of the driver’s income was fees and tips paid by their customers. The court held that the drivers could not bring a lawsuit based upon the Illinois Wage Payment and Collection Act, claiming that they were paid less than minimum wage and were subject to improper deductions from their paycheck for various expenses.

The court held that the Act defined wages as compensation due to the employee from the employer pursuant to an employment contract or agreement. In this case, there were no wages due to the cab drivers from the cab companies, but rather payments owed by the drivers to the companies for leasing the cab. Any income that the cab drivers received was “indirect,” meaning that it came from a third party (the passenger), not from the cab company. Under these conditions, the cab drivers could not claim that they were denied their proper wages under the Illinois Wage Payment and Collection Act.

The court noted that even though it was dismissing the Plaintiff’s case, it was possible that the Plaintiffs would have a cause of action under either Illinois Minimum Wage law or the Federal Fair Labor Standards Act, for failing to pay the minimum wage.

The court did not actually litigate the issue of whether the drivers were, in fact, employees. It assumed that they were, and held that even so, they did not have the right to unpaid wages, since the cab companies were not obligated to pay them wages.